Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025

The DSS is the United Kingdom’s first financial market infrastructure sandbox under the Financial Services and Markets Act 2023. It permits firms to test developing technologies, including distributed ledger technology, in the issuance, trading and settlement of securities under a temporarily modified framework. Entrants may undertake activities associated with a central securities depository and, where authorised, combine them with operating a trading venue.

The 2025 amendment addresses how existing requirements apply inside that framework. Its principal change concerns the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, or MLRs. HM Treasury’s explanatory memorandum states that DLT-related DSS activity could otherwise be treated as a cryptoasset service. A firm already authorised or registered for other financial services activity might therefore need separate FCA registration as a cryptoasset business. The government regarded that result as disproportionate for regulated securities-market activity in the sandbox.

Regulations 4 and 7 add the MLRs to the legislation modified for the DSS and insert a new Part 6 into the Schedule to the 2023 regulations. The amendment temporarily disapplies selected MLR provisions that depend on concepts such as a cryptoasset exchange provider or custodian wallet provider when the relevant activity occurs within the DSS. It is not a general exemption from United Kingdom anti-money laundering law. Other applicable AML and counter-terrorist financing requirements continue, and the modification does not extend outside the sandbox.

Regulation 3 clarifies the “appropriate regulator” for specified ancillary financial market infrastructure activities, allocating responsibility between the Financial Conduct Authority and the Bank of England according to the activity. Regulation 5 modifies the sandbox version of the United Kingdom Central Securities Depositories Regulation. It requires a digital securities depository to operate a scheme through which employees can report actual or potential DSS infringements.

Regulation 6 modifies Part 3 of the Schedule to the 2023 regulations. In specified DSS circumstances, it disapplies section 20 of the Financial Services and Markets Act 2000 for an authorised person carrying on financial market infrastructure activities as a digital securities depository or ancillary FMI activities. It also corrects the existing modification of paragraph 21 of Schedule 17A to that Act.

The amendments are principally relevant to DSS entrants, prospective digital securities depositories, authorised firms undertaking in-scope FMI activity, and the FCA and Bank of England as supervisors. They may also affect issuers, trading venues, settlement participants and service providers interacting with a sandbox entrant. The instrument does not establish a general regime for cryptoasset exchanges, wallet providers or retail token markets; its operation is tied to activity within the DSS.

UKSI 2025/93 is in force as of 19 June 2026. It should be read with the 2023 DSS Regulations, applicable Bank of England rules and guidance, and FCA requirements for separately regulated activity. The underlying 2023 DSS Regulations are scheduled to cease to have effect on 8 January 2029 unless the framework changes beforehand. That date concerns the statutory duration of the underlying sandbox regulations, not a separate repeal date in the 2025 amendment.

The amendment is therefore a targeted adjustment to the DSS. It reduces potential duplication arising from cryptoasset-specific MLR classification while preserving the broader supervisory structure and adding reporting and permissions changes. Its practical effect depends on the activities, permissions and sandbox status of the entity concerned.